Character.AI Sale Process Advances With Disney Stalking Horse Agreement
Character.AI’s Chapter 11 sale process has moved forward after a United States Bankruptcy Court approved bidding procedures and a proposed transaction involving Disney. The company says bids for its assets are due by November 24, 2026, with an auction scheduled for December 1.
- The Bankruptcy Court approved Character.AI’s bidding procedures on November 4, 2026.
- Character.AI filed for Chapter 11 protection on October 12, 2026.
- Disney’s agreement covers certain Disney Target Assets and serves as the stalking horse transaction.
- Bids are due by November 24, 2026 at 12:00 p.m. (ET).
- An auction is scheduled for December 1, followed by a sale hearing on December 3 and 4.
Court approves procedures for the sale
On November 4, 2026, the Bankruptcy Court for the District of Delaware entered an order approving procedures that will govern Character.AI’s sale process. The order also approved a transaction notice describing the proposed sale, bidding process, auction and sale hearing.
Character.AI filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code on October 12, 2026. The company is seeking to sell, license or otherwise dispose of all or substantially all of its assets, free and clear of liens, claims, interests and encumbrances to the fullest extent authorized by section 363 of the Bankruptcy Code.
Documents connected with the case, including the bidding procedures order and the relevant motions, are available through the case website administered by the company’s claims and noticing agent, Stretto, Inc.
Disney agreement serves as the stalking horse bid
The court approved Character.AI’s designation of the Stalking Horse Transaction Agreement with Disney Worldwide Services, Inc. The agreement, dated October 13, 2026, covers the sale or license of certain assets identified as the Disney Target Assets.
Disney’s agreement is subject to Character.AI accepting higher or otherwise better offers under the approved bidding procedures. Those procedures also establish a process for designating additional stalking horse purchasers for assets outside the Disney Target Assets.
The notice says interested bidders should contact Houlihan Lokey, the proposed investment banker to Character.AI, or the company’s proposed counsel, Wilson Sonsini Goodrich & Rosati, P.C. The deadline to submit a bid for any assets is November 24, 2026 at 12:00 p.m. (ET).
Auction and sale hearing are set for December
Unless cancelled or adjourned under the bidding procedures order, the auction will take place on December 1, 2026 at 10:00 a.m. (ET). Character.AI says the auction location will be determined by the debtor, or it may take place virtually by videoconference.
The Bankruptcy Court is scheduled to hold a sale hearing on December 3 and 4, 2026 at 9:30 a.m. (ET), unless the hearing is adjourned. Parties may file objections to the sale by November 18, 2026 at 4:00 p.m. (ET), subject to the requirements set out in the notice.
If Disney is a winning bidder, Character.AI says it will seek approval of a transaction that includes the Stalking Horse Transaction Agreement, a Transition Services Agreement dated September 18, 2026, and an Exclusivity and Prepayment Agreement dated September 18, 2026. The proposed order would authorize the transfer of the Disney Target Assets to Disney and the assumption of the Transition Services Agreement under sections 363 and 365 of the Bankruptcy Code. The process leaves room for higher or otherwise better bids before the court considers the sale.
Character.AI: Chapter 11 Update and Transaction Notice
